Acquisition of Interest in Timok Project March 7, 2016 TSX: LUN OMX: LUMI
Participants Presenters and Questions/Answers Paul Conibear Marie Inkster Julie Lee Harrs President & Chief Executive Officer Senior Vice President & Chief Financial Officer Senior Vice President, Corporate Development 2
Cautionary Statements and NI 43-101 Compliance Caution Regarding Forward-Looking Information Certain of the statements made and information contained herein is forward-looking information within the meaning of the Ontario Securities Act. Forward-looking statements are subject to a variety of risks and uncertainties which could cause actual events or results to differ from those reflected in the forward-looking statements, including, without limitation, the potential exercise of the ROFO by Reservoir, satisfaction of closing conditions, the timing of closing the proposed transaction, the completion of the feasibility study on the timetable proposed, foreign currency fluctuations; risks inherent in mining including environmental hazards, industrial accidents, unusual or unexpected geological formations, ground control problems and flooding; risks associated with the estimation of mineral resources and reserves and the geology, grade and continuity of mineral deposits; the possibility that future exploration, development or mining results will not be consistent with the Company s expectations; the potential for and effects of labour disputes or other unanticipated difficulties with or shortages of labour or interruptions in production; actual ore mined varying from estimates of grade, tonnage, dilution and metallurgical and other characteristics; the inherent uncertainty of production and cost estimates and the potential for unexpected costs and expenses, commodity price fluctuations; uncertain political and economic environments; changes in laws or policies, foreign taxation, delays or the inability to obtain necessary governmental permits; and other risks and uncertainties, including those described under Risk Factors Relating to the Company s Business in the Company s Annual Information Form and in each management discussion and analysis. Forward-looking information is in addition based on various assumptions including, without limitation, the expectations and beliefs of management, the assumed long term price of copper, nickel, lead and zinc; that the Company can access financing, appropriate equipment and sufficient labour and that the political environment where the Company operates will continue to support the development and operation of mining projects. Should one or more of these risks and uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in forwardlooking statements. Accordingly, readers are advised not to place undue reliance on forward-looking statements. The technical information in this presentation has been reviewed by Stephen Gatley, Vice President Technical Services of the Company, a "Qualified Person" under NI 43-101. Note: All dollar amounts are in US dollars unless otherwise denoted. 3
Acquisition of Interest in High Grade Cu-Au Project Agreement to purchase an interest in Freeport-McMoRan s ( Freeport ) stake in the Timok project located in eastern Serbia. Reservoir Minerals ( Reservoir ) is a partner on the project High grade copper-gold Cukaru Peki deposit - part of the Timok project properties Upper Zone High grade Cu/Au massive and semi-massive sulphide Lower Zone Potentially large, high grade, Cu/Au porphyry-style mineralization Staged development plan: Phase 1 Pursue initial operations targeting exploitation of the Upper Zone Phase 2 Ongoing exploration/development initiatives on the Lower Zone Transaction is subject to Reservoir s right of first offer ( ROFO ), open for 60 days from notice date Total consideration of up to US$262.5M payable to Freeport in stages upon the achievement of key development milestones Enhances Lundin s long-term copper growth pipeline, while preserving a strong balance sheet 4
Transaction Overview Transaction Purchase Price Financing Conditions Acquiring up to 75% of the Upper Zone (Reservoir 25%) post study delivery Up to 21% contributing interest in the Lower Zone Lundin retain up to 75% interest in all other assets of the Timok project except for new large mineral discoveries (>4 m tonnes Cu Eq.) for which Freeport have a back in right, and Lundin retain 21% Aggregate purchase price of up to US$262.5M payable as follows: US$135M payable to Freeport upon closing of transaction US$20M to be spent by Lundin on agreed Lower Zone work US$45M payable to Freeport upon earliest of (i) build decision on the Upper Zone, (ii) access to any ore body for direct ship ore US$50M payable to Freeport upon achievement of commercial production US$12.5M recoupment of project expenditures Cash on hand Subject to Reservoir s ROFO and other customary closing conditions ROFO is open for acceptance by Reservoir for 60 days from notice date Closing Subject to ROFO, closing of transaction expected in Q2/2016 5
Lundin Mining Investment Rationale High grade Cu-Au deposit overlying potential Tier 1 Lower Zone porphyry target Size, quality and stage of Upper Zone ideal match for Lundin core skills Staged development allows time to quantify and develop Lower Zone optimally Excellent local and regional infrastructure, nearby historic Bor mine and smelter Staged payment structure allows total acquisition cost to be paid on milestones Levers off the highly successful Freeport/Lundin Tenke partnership, with Reservoir s regional exploration presence and in-country skills 6
Adding to a Globally Diversified Portfolio Zinkgruvan Zinc-Lead-Copper (Sweden) Freeport Cobalt 1 Cobalt Refinery (Finland) Eagle Nickel-Copper (USA) Neves-Corvo Copper-Zinc (Portugal) Timok JV 2 Copper-Gold (Serbia) Candelaria Copper-Gold-Silver (Chile) Tenke Fungurume 1 Copper-Cobalt (DRC) Timok adds a high quality copper/gold project to Lundin s growth pipeline An ideal fit within the overall asset base of operations in the Americas and Europe 1. Lundin Mining holds a 24% equity stake in the world-class Tenke Fungurume copper/cobalt mine in the Democratic Republic of Congo and in the Freeport Cobalt Oy business, which includes a cobalt refinery located in Kokkola, Finland. 2. Timok JV ownership as stated in this presentation. 7
Timok Project (Serbia) Project located 160 km SE of Belgrade, Serbia 6 km south of RTB Bor copper-gold mining/smelting complex Recent modernization of RTB Bor smelter 4 exploration licenses with significant exploration potential Historic local mining culture and excellent regional infrastructure New Serbian Mining Code promulgated in 2015 Progressive investment climate in Serbia Source: Freeport 8
Cukaru Peki Deposit High grade copper and gold underground deposit Exploration stage underground project Targets include two zones: Upper Zone: High grade massive/semi-massive sulphide Inferred resource 1 : 65.3 Mt @ 2.6% Cu, 1.5 gpt Au Lower Zone: Porphyry-style copper/gold mineralization Prospective Tier 1 Cu/Au deposit Extends to > 2,000 m depth 1. Reservoir press release dated January 27, 2014. Source: Freeport, Reservoir 9
Cukaru Peki Deposit Upper Zone Conceptual mineralized body in red, together with any contiguous mineralization above elevation -575masl Lower Zone Conceptual mineralized body in blue, together with any contiguous mineralization below elevation -575masl Source: Freeport 10
Timok Project JV Ownership Structure Timok currently held 55% by Freeport and 45% by Reservoir Freeport is currently operator and fully funding the project pursuant to the Timok JVSA Upon the delivery of a feasibility study: Freeport will earn an additional 20% interest, for a total project ownership interest of 75%, and Reservoir will retain a 25% interest and be required to contribute its prorata share of ongoing development expenditures 11
Timok Project JV Ownership Structure Post Closing Upon the completion of the transaction, Lundin s ownership interest will be: Following delivery of a feasibility study, Lundin s ownership interest will be: 55% of Upper Zone (Reservoir 45%), and 15.4% of Lower Zone (Freeport 39.6%, Reservoir 45%) 75% of Upper Zone (Reservoir 25%), and 21% of Lower Zone (Freeport 54%, Reservoir 25%) 12
Timok Project JV Budgets and Work Program Lundin to be appointed as Operator Lundin will advance development of both Upper Zone & Lower Zone in accordance with approved budgets and work programs Lundin will have sole right to propose budgets and work programs relating to the Upper Zone and agreed Lower Zone work; Freeport will have sole rights relating to the Lower Zone (other than agreed Lower Zone work) Until delivery of a feasibility study, Lundin will fund 100% of the Upper Zone development costs as well as $20 million of agreed Lower Zone work, and additionally, Lundin / Freeport will fund 28% / 72%, of other Lower Zone development costs Upon delivery of a feasibility study: Lundin and Reservoir will be responsible for funding development of Upper Zone on a 75%/25% pro-rata basis Lundin, Freeport & Reservoir will be responsible for funding development of Lower Zone on a pro-rata basis (21%/54%/25%) 13
Next Steps Transaction has triggered ROFO in favour of Reservoir which is open for 60 days If ROFO expires / waived Completion of transaction between Lundin and Freeport Expect Closing in Q2 2016 Advance development of Upper Zone In parallel, advance exploration of the large underlying Lower Zone 14
Timok Project An Ideal Fit for Lundin Mining Acquisition consistent with Lundin s growth criteria: size, quality, commodity, stage and location Contributes strategically to our medium and long term growth pipeline with two high quality projects Leverages our proven underground development and high grade mine operating skill sets Preserves a strong balance sheet with a unique, value added transaction Leverages the proven partnership track record of Lundin and Freeport, working with Reservoir and all Serbian stakeholders to progress Timok 15
Looking north to the RTB Bor facilities. Cukaru Peki deposit equal distance to the south.